Introductory advise

• Use the Library effectively including your smart phone.

• Class notes are not sufficient you need to prepare your own notes to
supplement the class notes
• Read relevant cases for better understanding of principles.
• Course outline should provide you with a guide.
• Make sure you have the LCA

11/21/2023 Dr. Cosmas J (LLD) 1

Law of Contract
• Very important subject to a human being
• On our daily life one may find entering into several contractual
arrangements
• You may not find it an issue until when the other party fails to fulfill
his/her part of the bargain and you suffer loss
• Issues as to where should you sue him/her arises
• Issues as to do you have a contract with him/her becomes important.
• Is that arrangement recognized by law or illegal?
Meaning of the term contract:
• It is an agreement enforceable by law, section. 2(1)(h)
of the Law of Contract Act CAP 345 (LCA)
• i.e. an agreement between two or more parties
intended to have legal consequences.
• An agreement is defined under 2(1)(e) to mean every
promise and every set of promises forming the
consideration for each other.
• Consensus ad idem

11/21/2023 Dr. Cosmas J (LLD) 3

Agreement vs. legally binding agreement
• There is a considerable difference between an agreement and a
legally binding agreement.
• A legally binding agreements forms a contract as per 2(1)(h).
• Assume A invites J for dinner who accepts but does not turn up.
• Assume A makes a phone call Booking a room at a Hotel, on that
account the room is reserved for him but fails to turn up.
• Not all agreements forms a contract.

11/21/2023 Dr. Cosmas J (LLD) 4

ELEMENTS FOR A CONTRACT
• For agreement to constitute a contract there are necessary elements
which must be met.
• Section 10 of the LCA provides for the necessary elements which
must be present to constitute a legally binding agreement/ contract.

11/21/2023 Dr. Cosmas J (LLD) 5

Elements of a valid Contract
• Parties
• Offer
• Acceptance
• Free consent
• Consideration
• Intention to create legal relations
• Capacity
• Legality of the object/subject matter

11/21/2023 Dr. Cosmas J (LLD) 6

Parties
• The term contract presupposes the existence of two
sides/parties, one proposing the other accepting:

• Commonly referred as offeror and offeree

• Promisor and promisee.
• Therefore any contract requires two or more parties in
order to exist (natural or legal persons)

11/21/2023 Dr. Cosmas J (LLD) 7

Meaning of an offer:
• It is a set of terms moving from one party to another
with intention of the former to be bound by them. See
section 2 (1) (a) of the Contract Act.

• It states that; it is a signification to another person of

ones willingness to do or not to do something with a
view of obtaining assent (or refusal) of that other
person.

11/21/2023 Dr. Cosmas J (LLD) 8

Characteristic of an offer
• The terms of an offer are usually Clear and certain,
definite and capable of acceptance.
acceptance
• They also must constitute final and firm expression by
the proposer of his willingness to be bound should the
offer be accepted.
• See s. 29 on the consequences of uncertainty of terms
in the contract.

11/21/2023 Dr. Cosmas J (LLD) 9

 • Offer is effectively communicated (or communication of
offer is complete) when it comes to the knowledge of
the person to whom it was made s 4(1) LCA
• Types of offers are:
• specific offer- made to a definite person or definite
class of persons and
• General offer- when made to the world at large.

11/21/2023 Dr. Cosmas J (LLD) 10

Offer & Invitation to treat contrasted
• Invitation to treat are terms which aim at inviting
people to approach the owners of the goods or to
respond to the advertisements by making an offer.
• Its terms are usually uncertain, ambiguous such that it
is not known exactly as to whether the proposer
intends to be bound by them or not.
• They tend to beg for further questions i.e. not capable
of acceptance.
• Common example here include the following

11/21/2023 Dr. Cosmas J (LLD) 11

 AUCTIONS

• In an auction, the auctioneer's call for bids is an invitation to treat, a

request for offers.
• The bids made by persons at the auction are offers, which the
auctioneer can accept or reject as he chooses.
• Similarly, the bidder may retract his bid before it is accepted

11/21/2023 Dr. Cosmas J (LLD) 12

Payne v Cave (1789)

• The defendant made the highest bid for the plaintiff's goods at an
auction sale, but he withdrew his bid before the fall of the
auctioneer's hammer.
• It was held that the defendant was not bound to purchase the goods.
• His bid amounted to an offer which he was entitled to withdraw at
any time before the auctioneer signified acceptance by knocking
down the hammer.

11/21/2023 Dr. Cosmas J (LLD) 13

HOWEVER
• Where there is no reserve price stated by the auctineer, the auctineer
is bound to sell to the highest bidder and cannot withdraw the sale
simply because the price by the highest bidder is low.
• Read section 27 ETA on electronic auctions.
• The time which the electronic transaction was received is considered
to be the time of the fall of the hammer.

11/21/2023 Dr. Cosmas J (LLD) 14

DISPLAY OF GOODS
• The display of goods with a price ticket attached in a shop window or
on a supermarket shelf is not an offer to sell but an invitation for
customers to make an offer to buy.
• Fisher v Bell (1960)3 All ER 713
• A shopkeeper displayed a flick knife with a price tag in the window.
The Restriction of Offensive Weapons Act 1959 made it an offence to
'offer for sale' a 'flick knife'.
• The shopkeeper was prosecuted in the magistrates' court but the
Justices declined to convict on the basis that the knife had not, in law,
been 'offered for sale'.
11/21/2023 Dr. Cosmas J (LLD) 15
• "It is perfectly clear that according to the ordinary law of contract the
display of an article with a price on it in a shop window is merely an
invitation to treat.
• It is in no sense an offer for sale the acceptance of which constitutes
a contract."

11/21/2023 Dr. Cosmas J (LLD) 16

 ADVERTISEMENTS

• Advertisements of goods for sale are normally interpreted as

invitations to treat
• Partridge v Crittenden (1968)AllER421
• It was an offence to offer for sale certain wild birds. The defendant
had advertised in a periodical 'Quality Bramblefinch cocks,
Bramblefinch hens, 25s each‘.
• HELD:when one is dealing with advertisements and circulars, unless
they indeed come from manufacturers, there is business sense in
their being construed as invitations to treat and not offers for sale.

11/21/2023 Dr. Cosmas J (LLD) 17

• However, advertisements may be construed as offers if they are
unilateral, ie,, open to all the world to accept .
• Carlill v Carbolic Smoke Ball Co (1893)1QB256
• An advert was placed for 'smoke balls' to prevent influenza. The
advert offered to pay £100 if anyone contracted influenza after using
the ball. :

11/21/2023 Dr. Cosmas J (LLD) 18

• The company deposited £1,000 with the Alliance Bank to show their
sincerity in the matter. The plaintiff bought one of the balls but
contracted influenza. It was held that she was entitled to recover the
£100. The Court of Appeal held that;

11/21/2023 Dr. Cosmas J (LLD) 19

• (a) the deposit of money showed an intention to be bound, therefore
the advert was an offer;
(b) it was possible to make an offer to the world at large, which is
accepted by anyone who buys a smokeball;
(c) the offer of protection would cover the period of use; and
(d) the buying and using of the smokeball amounted to acceptance.

11/21/2023 Dr. Cosmas J (LLD) 20

TENDERS
• WHERE there is a tender statement it has been held that the
statement is not an offer, but an invitation to treat;
• that is, it is a request by respective company to the public to bring
forward their offers.
• HOWEVER, in special circumstances tenders may imply offers
especially when it states that the highest fixed bidder shall be
awarded.

11/21/2023 Dr. Cosmas J (LLD) 21

Termination of an offer/proposal S. 6(1) of the LCA
• Means by which offer can be terminated:
• Rejection
• Counter offer; See for Hyde v Wrench (1840).
• Revocation before acceptance ; Byrne v Van Tienhoven
(1880
• Failure of a condition subject to which the offer was
made
• Lapse of time
• Death of offeror

11/21/2023 Dr. Cosmas J (LLD) 22

Rejection
• Hyde v Wrench (1840)
• 6 June W offered to sell his estate to H for £1000; H offered £950
27 June W rejected H's offer
29 June H offered £1000. W refused to sell and H sued for breach of
contract.
• HELD: If the defendant's offer to sell for £1,000 had been
unconditionally accepted, there would have been a binding contract;
instead the plaintiff made an offer of his own of £950, and thereby
rejected the offer previously made by the defendant.

11/21/2023 Dr. Cosmas J (LLD) 23

REVOCATION
• The offer may be revoked by the offeror at any time until it is
accepted.
• However, the revocation of the offer must be communicated to the
offeree(s).
• Unless and until the revocation is so communicated, it is ineffective.

11/21/2023 Dr. Cosmas J (LLD) 24

• Byrne v Van Tienhoven (1880)5 CPD334
• 1 Oct. V posted a letter offering goods for sale.
• 8 Oct. V revoked the offer; which arrived on 20 Oct.
• 11 Oct. P accepted by telegram
• 15 Oct. P posted a letter confirming acceptance.
• HELD: the defendant's revocation was not effective until it was
received on 20 Oct. This was too late as the contract was made on
the 11th when the plaintiff sent a telegram. Judgment was given for
the plaintiffs.

11/21/2023 Dr. Cosmas J (LLD) 25

LAPSE OF TIME
• Where an offer is stated to be open for a specific length of time, then
the offer automatically terminates when that time limit expires.
• Where there is no express time limit, an offer is normally open only
for a reasonable time. See Ramsgate v Montefiore (1866)

11/21/2023 Dr. Cosmas J (LLD) 26

• On 8 June, the defendant offered to buy shares in the plaintiff
company. On 23 Nov, the plaintiff accepted but the defendant no
longer wanted them and refused to pay.
• It was held that the six-month
month delay between the offer in June and
the acceptance in November was unreasonable and so the offer had
'lapsed',
• It could no longer be accepted and the defendant was not liable for
the price of the shares.

11/21/2023 Dr. Cosmas J (LLD) 27

FAILURE OF A CONDITION
• An offer may be made subject to conditions. Such a condition may be
stated expressly by the offeror or implied by the courts from the
circumstances.
• If the condition is not satisfied the offer is not capable of being
accepted.

11/21/2023 Dr. Cosmas J (LLD) 28

DEATH
• The offeree cannot accept an offer after notice of the offeror's death.
However, if the offeree does not know of the offeror's death, and
there is no personal element involved, then he may accept the offer.

11/21/2023 Dr. Cosmas J (LLD) 29

Counter offer
• It is a term in contract law which signify that instead of making
acceptance to the existing offer the offeree suggests a new offer.
• Counter offer are normally made by the offerree.
• Counter offer renders the offer to cease to exist
• The parties change positions as the offeror becomes the offeree and
vise versa.
• Hyde vs. Wrench above

11/21/2023 Dr. Cosmas J (LLD) 30

Cross offer
• Is a contract law term that refers to an offer made in ignorance that
the offeree has made the same offer to the offeror.
• In a cross offer both parties state to each other the same proposal.
• An offer by A to sell to B on certain terms and an offer by B to buy
from A on the same terms unaware of the A’s proposition at that
time.

11/21/2023 Dr. Cosmas J (LLD) 31

ACCEPTANCE
• It is defined under S.2(1)(b) to mean signification of
assent to the proposal by a person to whom it was
made.
• Acceptance must be absolute and unqualified i.e. final
and conclusivee (S.7 Cap345 ).
• Mirror image rule

11/21/2023 Dr. Cosmas J (LLD) 32

ACCEPTANCE
• An acceptance is a final and unqualified acceptance of the terms of an
offer.
• To make a binding contract the acceptance must exactly match the
offer.
• The offeree must accept all the terms of the offer
• MIRROR IMAGE RULE
• However, in certain cases it is possible to have a binding contract
without a matching offer and acceptance. See s.9 LCA

11/21/2023 Dr. Cosmas J (LLD) 33

Communication of an acceptance
• Communication of acceptance is deemed to be made
by act or omission of the party accepting. (S.3 LCA).
• Generally acceptance has no effect until it is
communicated to the offeror
• i.e. when it comes to the knowledge of offeror S.2(1)(b)
Cap. 345.
• In Household Fire Insurance Co v Grant (1879) 41 L.T
298

11/21/2023 Dr. Cosmas J (LLD) 34

• The general rule is that an acceptance must be communicated to the
offeror.
• Until and unless the acceptance is so communicated, no contract
comes into existence:

11/21/2023 Dr. Cosmas J (LLD) 35

INTENTION TO CREATE LEGAL RELATION
• The parties must intend the agreement to be legally binding.
• But how can the court find out what is in the parties' minds?
• The nearest the courts can get to discover this intention is to apply an
objective test and judge the situation by what was said and done.
• The law divides agreements into two groups, social & domestic
agreements and business agreements.
• Tanganyika Garage vs. Marcel Mafuruki(1975)LRT
Mafuruki 23

11/21/2023 Dr. Cosmas J (LLD) 36

SOCIAL & DOMESTIC AGREEMENTS
• This group covers agreements between family members, friends and
workmates.
• The law presumes that social agreements are not intended to be
legally binding.

• However, if it can be shown that the transaction had the opposite

intention, the court may be prepared to rebut the presumption and
to find the necessary intention for a contract

11/21/2023 Dr. Cosmas J (LLD) 37

• The cases show it is a difficult task to rebut such a presumption
• Agreements between a husband and wife living together as one
household are presumed not to be intended to be legally binding,
unless the agreement states to the contrary.

11/21/2023 Dr. Cosmas J (LLD) 38

Balfour v Balfour [1919] 2 KB 571
• The defendant who worked in Ceylon, went to England with his wife
on holiday. He later returned to Ceylon alone, the wife remaining in
England for health reasons.
• The defendant promised to pay the plaintiff £30 per month as
maintenance, but failed to keep up the payments when the marriage
broke up. The wife sued.
• It was held that the wife could not succeed because: (1) she had
provided no consideration for the promise to pay £30; and (2)
agreements between husbands and wives are not contracts because
the parties do not intend them to be legally binding

11/21/2023 Dr. Cosmas J (LLD) 39

EXCEPTIONS
1.The presumption against a contractual intention will not apply where
the spouses are not living together in amity at the time of the
agreement
Merritt v Merritt [1970] 2 All ER 760
• The husband left his wife. They met to make arrangements for the
future. The husband agreed to pay £40 per month maintenance, out
of which the wife would pay the mortgage.
• When the mortgage was paid off he would transfer the house from
joint names to the wife's name. He wrote this down and signed the
paper, but later refused to transfer the house.
11/21/2023 Dr. Cosmas J (LLD) 40
• It was held that when the agreement was made, the husband and
wife were no longer living together, therefore they must have
intended the agreement to be binding, as they would base their
future actions on it.
• This intention was evidenced by the writing. The husband had to
transfer the house to the wife

11/21/2023 Dr. Cosmas J (LLD) 41

2.If a social agreement will have serious consequences for the parties,
this may rebut the presumption too
Parker v Clarke [1960] 1 All ER 93
• Mrs Parker was the niece of Mrs Clarke. An agreement was made that
the Parkers would sell their house and live with the Clarkes.
• They would share the bills and the Clarkes would then leave the
house to the Parkers

11/21/2023 Dr. Cosmas J (LLD) 42

• . Mrs Clarke wrote to the Parkers giving them the details of expenses
and confirming the agreement. The Parkers sold their house and
moved in.
• Mr Clarke changed his will leaving the house to the Parkers. Later the
couples fell out and the Parkers were asked to leave. They claimed
damages for breach of contract
• It was held that the exchange of letters showed the two couples were
serious and the agreement was intended to be legally binding
because (1) the Parkers had sold their own home, and (2) Mr Clarke
changed his will. Therefore the Parkers were entitled to damages

11/21/2023 Dr. Cosmas J (LLD) 43

• Tanner v Tanner [1975] 1 WLR 1346.
• A man promised a woman that the house in which they had lived
together (without being married) should be available for her and the
couple's children.
• It was held that the promise had contractual force because, in
reliance on it, the woman had moved out of her rent-controlled
rent flat.

11/21/2023 Dr. Cosmas J (LLD) 44

BUSINESS AGREEMENTS
• In business agreements the presumption is that the parties intend to
create legal relations and make a contract.
• This presumption can be rebutted by the inclusion of an express
statement to that effect in the agreement
Rose and Frank Co v Crompton Bros Ltd [1925] AC 445
• The defendants were paper manufacturers and entered into an
agreement with the plaintiffs whereby the plaintiffs were to act as
sole agents for the sale of the defendant's paper in the US.

11/21/2023 Dr. Cosmas J (LLD) 45

• The written agreement contained a clause that it was not entered
into as a formal or legal agreement and would not be subject to legal
jurisdiction in the courts but was a record of the purpose and
intention of the parties to which they honourably pledged
themselves, that it would be carried through with mutual loyalty and
friendly co-operation
• The plaintiffs placed orders for paper which were accepted by the
defendants. Before the orders were sent, the defendants terminated
the agency agreement and refused to send the paper.

11/21/2023 Dr. Cosmas J (LLD) 46

• It was held that the sole agency agreement was not binding owing to
the inclusion of the "honourable pledge clause".
• Regarding the orders which had been placed and accepted, however,
contracts had been created and the defendants, in failing to execute
them, were in breach of contract.

11/21/2023 Dr. Cosmas J (LLD) 47

CAPACITY TO CONTRACT
• Section 11(1) of LCA provides for a presumption of capacity;
Every person is competent to contract who is of the age of majority
according to the law to which he is subject, and who is of sound
mind, and is not disqualified from contracting by any law to which he
is subject.
• The Age of Majority Act , cap 43 provides that a person who is 18 yrs
old and above is of majority age.

11/21/2023 Dr. Cosmas J (LLD) 48

AGE OF MAJORITY
• S. 2 reads;
Every person domiciled in Tanzania shall attain full age and cease to
be under any disability of minority at the beginning of the eighteenth
anniversary of the day on which he was born
The sales of Goods Act, cap 214 provides;
• Capacity to buy and sell is regulated by the general law concerning
capacity to contract, and to transfer and acquire property.

11/21/2023 Dr. Cosmas J (LLD) 49

SOUND MIND
• Who is a person of sound mind? S. 12(1) LCA define;

A person is said to be of sound mind for the purpose of making a

contract if, at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its effect
upon his interests

11/21/2023 Dr. Cosmas J (LLD) 50

Disqualification by any Law to which he is subjected?

• S. 34 Bankruptcy Act cap 25; a bankrupt cannot enter

into an employment contract.
• Under Companies Act, once a company is declared
Insolvent, the court may wind it up and appoint an
official receiver, the company looses the legal capacity
to contract
• The consequence of contracting with the above persons
is that the contract becomes VOID. S 11(2) LCA

11/21/2023 Dr. Cosmas J (LLD) 51

EXCEPTIONS TO s. 11(2)
• As it can easily be noted, the consequences of S. 11(2) are so harsh to
the opposite party as a void contract is as good as no contract existed
at all.
• Hence the law and the court have developed some exceptions to
mitigate the harshness of the section.

11/21/2023 Dr. Cosmas J (LLD) 52

Valid Contracts with Minors/unsound mind/
• S. 4 SOGA, Cap 214;

4(2) Where necessaries are sold and delivered to an infant or minor,

or to a person who by reason of mental incapacity or drunkenness is
incompetent to contract, he must pay a reasonable price therefor.

11/21/2023 Dr. Cosmas J (LLD) 53

• 4(3) Necessaries in this section mean goods suitable to the
condition in life of such infant or minor or other person, and
to his actual requirements at the time of the sale and
delivery.

11/21/2023 Dr. Cosmas J (LLD) 54

• S. 68 LCA also provide for this exception

If a person incapable of entering into a contract, or anyone whom he

is legally bound to support, is supplied by another person with
necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the
property of such incapable person.

11/21/2023 Dr. Cosmas J (LLD) 55

CLARIFICATION ON NECESSARIES
• Necessaries" are those things without which a person cannot
reasonably exist and include food, clothing, lodging, education or
training in a trade and essential services
• The "condition of life"" of the minor means his social status and his
wealth. What is regarded as necessary for the minor residing in a well
off residences may be unnecessary for the resident of a slum.

11/21/2023 Dr. Cosmas J (LLD) 56

Suitability is crucial
• Whatever the minor's status, the goods must be suitable to his actual
requirements-
• if he already has enough necessaries, more cannot be necessary:
• Nash v. Inman [1908] 2 KB 1, CA.
• Here a tailor sued a minor to whom he had supplied clothes,
including 11 fancy waistcoats.
• It was decided that, as the minor was an undergraduate at
Cambridge University at the time, the clothes were suitable according
to the minor's station in life.

11/21/2023 Dr. Cosmas J (LLD) 57

• Unfortunately for the tailor, however, it was further decided that they
were not necessary, as he already had sufficient clothing.
• Minors are only under a legal obligation to pay for things necessary
for their maintenance although even then they will only be required
to pay a reasonable price for any necessaries purchased - so no
contract was enforceable

11/21/2023 Dr. Cosmas J (LLD) 58

MINOR’S LIABILITY FOR BENEFICIAL
ARRANGEMENT
• In Roberts v Gray [1913] KB 520, CA, CA a minor was held liable for his
failure to perform a contract for a tour with the plaintiff, a noted
billiards player. It was a contract for the instruction of the minor. The
contract was wholly executory.
• it was held that the contract was binding on him from its formation.
• A contract which would otherwise be binding as a contract for
necessaries is not so if it contains harsh and onerous terms: Fawcett v.
Smethurst (1914) 84 LJKB 473, (Atkin
Atkin J)

11/21/2023 Dr. Cosmas J (LLD) 59

De Francesco vs. Barnum 189045 CH D 430
• In this case a 14 year old girl was apprenticed for 7 years to learn
stage dancing.

The terms restrained her from several acts for example, not being
maintained by Barnum, not being able to accept other work and
being deemed to have resigned if wishing to marry.
• It was held in this case that beneficial contracts of service require that
the beneficial terms outweigh the onerous terms. In this case they did
not - the restrictions on her were too harsh so the contract was not
considered binding

11/21/2023 Dr. Cosmas J (LLD) 60

Clement vs. London North Railway
• In this case a young railway porter agreed to join an insurance
scheme and to forgo any claims he might have under the Employers'
Liability Act, he had forfeited his rights under the Act, the contract as
a whole being for his benefit
• The law allows him to do so, provided that the contract, taken as a
whole, is manifestly for his benefit.
• HELD; It is for the minor's benefit that he should be able to obtain
employment which would be difficult if he could not make a binding
contract.

11/21/2023 Dr. Cosmas J (LLD) 61

Acquisition of property with obligations.
• When a minor acquires "a subject of a permanent nature … with
certain obligations attached to it"-such
such as a leasehold, or shares in a
company-hehe is bound by the obligations as long as he retains the
subject.
• He must pay the rent or calls on the shares: London & North Western
Railway v M'Michael (1850) 5 Ex 114.
• The contract is voidable by the minor-he
minor may repudiate it any time
during his minority or within a reasonable time thereafter

11/21/2023 Dr. Cosmas J (LLD) 62

Restitution from a minor.
• Where a minor has obtained property under a contract which is not
enforceable against him, the adult party who can neither sue for the
price nor get the property back may suffer an injustice.
• Even where the minor has lied about his age, no action in deceit will
lie because this would, in effect, enable the contract to be enforced
against him; and for the same reason it is improbable that the minor
would be estopped from asserting his true age.

11/21/2023 Dr. Cosmas J (LLD) 63

• The UK, Minors' Contracts Act 1987, s3, now affords a limited
measure of redress. Where a contract made after the
commencement of the Act is unenforceable against a defendant
because he was a minor when it was made;
"… the court may, if it is just and equitable to do so, require the
defendant to transfer to the plaintiff any property acquired by the
defendant under the contract or any property representing it."

11/21/2023 Dr. Cosmas J (LLD) 64